Happiness as a Trading Edge

by D. R. Barton, Jr.

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“We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves.”
--Gautama Buddha

"Joy does not simply happen to us. We have to choose joy and keep choosing it every day."
--Henri Nouwen


I first traveled to Beverly Hills, California in 1994. I have to admit that my expectations of the area were set by a sitcom from my childhood days about Jed Clampett and his transplanted family: “The Beverly Hillbillies”. (To properly date myself here… can I add that I was a very young boy when I watched the show?) I expected to witness the opulence and exclusivity portrayed in the TV show, but what I experienced was so different that the memories have stayed with me to this day.

My trip was in support of a product that was in my business portfolio at DuPont — a high strength liner used to refurbish pipes that capitalized on the high tensile strength and lightweight characteristics of Kevlar® (the same fiber used in bullet-resistant vests). Believe it or not, Beverly Hills really does have hills and their storm drain pipes were being torn apart by the combination of pressure from heavy rains and big elevation drops. A construction company was using our material to reinforce the storm water system. It was a cool project and I was on site as part sales representative and part technical support (even if you’re in a business/marketing role, you can only hide the fact that you’re an engineer for so long…).

While I was there, I did see some magnificent houses — the ones built into the sides of hills were especially striking. Surprisingly, one of the things I remember most about this very affluent area was that people were unanimously and almost comically unhappy! Everyone was grousing about something. We weren’t digging or disturbing anyone’s yard, mind you — just relining existing pipes. Every personal interaction I had, whether it was business related or just meeting someone in passing had this heavy air of discomfort and dissatisfaction. And it wasn’t just me noticing these interactions as a visitor — I observed the people who lived there treating each other with the same air of melancholy.

For a striking difference — fast forward two years to another jobsite, this time in St. Maarten, the Dutch half of an Island in the Caribbean. By this point, I was working in an entirely different business role on a salt water desalination project. The project involved working far above the beautiful coastline and posh resorts in a village with dirt poor residents. They were so poor in fact, that when we were walking through the unpaved streets, one of the locals we were with pointed to a narrow ditch we were about to jump and said, “Don’t step in that” — I immediately saw (and smelled) why. It was an open ditch of untreated sewage running downhill out of the village.

The funny thing, though, was that despite living practically in squalor, these people were extraordinarily happy. Kids laughed and played with makeshift toys and balls. Everyone smiled. And people kept bringing us things. A homemade pastry from one house, cheese and crackers from another and one woman ran into her house and even brought us warm bottles of Coke. She said she was sorry that she didn’t have any ice at the moment.

Between these two experiences, I put together some important experiential learning of what I had understood theoretically —

Money doesn’t automatically buy happiness, and
“Stuff” (like nice houses and cars) can’t bring lasting joy.
Recently I’ve been working on tying in some great research on happiness to the field of trading and investing. As my Christmas present to you, I’d like to share some of my findings. Van has always been a proponent of trading while in the proper mental state. My experience and analysis certainly confirms and builds on that excellent foundation.

Happiness As An Edge

We do so many things in our lives attempting to create happiness. I suspect that many reading this article trade and invest, in part, because you get a certain amount of happiness from some aspect of the trading/investing process. But I also suspect that most could get even more happiness OUT of trading if you put more happiness INTO trading. Imagine using happiness as one of your trading edges. If that doesn’t make sense entirely, I’ll explain more in the next section.

First, though, I wanted to share some broader research about happiness with you. Don’t worry — this isn’t some fluffy stuff about rainbows and unicorns, this is real science with controlled studies that proves you and I can control a large part of our own happiness.

Let me introduce you to one of the best books I’ve read in years called The How of Happiness by Sonja Lyubomirsky. Here’s what Harvard Professor of Psychology Daniel Gilbert said about the book:

“Everyone has an opinion about happiness, and unfortunately, many of them write books. Finally we have a self-help book from a reputable scientist whose advice is based on the best experimental data. . . . and unlike almost every other book on the same shelf, it also happens to be true.”

What Research Tells Us about Happiness

The first point that Lyubomirsky makes about happiness is that a large part of our personal happiness is in our control. Early thinking in the field suggested that happiness was largely a function of our genes, that is, you are either born happy or not happy. Research using identical and fraternal twins now shows, however, that about only 50% of our happiness can be attributed to genetic predisposition. Studies show that we all have a happiness set point, much like our weight set point. While some people are inclined to be skinny, others are inclined to be happy. More surprisingly, living circumstances (as my trips to Beverly Hills and St. Marteen anecdotally validate) only account for 10% of an individual’s happiness level. A full 40% of our day-to-day happiness is a direct result of our intentional activities. And that’s actually a lot to work with. This is such an important finding that Dr. Lyubomirsky initially was going to call the book “The 40% Solution”. So the key to improving our happiness comes by focusing on the 40% of it that we can control.

Happiness, the Christmas Season, and Happiness’ Older Sibling, Joy

Whatever your spiritual practice, I’m sure that you see people around you who are totally stressed out during the Christmas holidays. These are usually people who are:

Trying to please everyone else or do what’s expected of them
Trying to be perfect (find the perfect gift, decorate perfectly, etc.)
Trying to find happiness in stuff
I actually feel deeply for people who turn a beautiful time meant for celebration and joy into a personal torture chamber. This brings me to a pause for a few thoughts on joy.

Joy is a very close cousin of happiness — I like to think of joy as a continual state of being while happiness is more of a renewable, temporary mental state. Joy, in my eyes, seems to reside more in the heart and soul, happiness in the mind and body.

In this Christmas season, I find my deepest sense of joy in a relationship with one who came to earth as a baby in a manger. Your spiritual tradition may lead to another source of primary joy. But whatever the source, the highest state of being for me is living in that joy moment-by-moment. Reveling in it and sharing that joy with all I touch. For me, the true meaning of this season is sharing my joy through a smile, a simple gesture of kindness or a listening ear (okay, and through some gift giving, too!). What are your favorite ways to lift someone’s spirits?

Happiness and Trading

It's no surprise that, like almost any worthwhile endeavor, managing our happiness requires effort. Here I see some great parallels between becoming a skilled trader and achieving a desired level of happiness. In both, so many people would like to have all of the benefits fall into their lap. The Holy Grail system that makes me rich or the magic pill/advice/”secret” that makes me happy. And in both arenas, there are loads of people ready to provide “The Answer”, when in fact, the answer is to find the things that really work and be intentional about practicing them regularly. One thing that works really well in trading is finding a mental state that works for you. Van suggests many in the Peak Performance Home Study course. My personal favorites are resourcefulness and relaxed alertness.

I have found that adding happiness or even joy to the process of trading really helps me. Here’s a thought for you — the opposite of joy is not sadness (a temporary state) but rather fear. And we all know the old saying that scared money is dead money. Trading scared is one of the quickest ways to strip an account — so getting to the opposite state of being is a goal for all of us to shoot for!

Personally, I have also tried trading for years with drudgery and striving but those states never seemed to help me. They often led to stress in my trading.

And surprise! The very same things that get people stressed out during the holidays effect traders as well:

Trying to please everyone else or do what’s expected of them. As Van has described so well, we can’t please all of our parts all of time.
Our part that wants excitement is usually in conflict with the part of us that wants security.
Following the crowd (doing what’s expected) usually leads us to be the last one to try to jump on a trend just before the reversal…
Trying to be perfect
This one is easy to see — I know many people who are still waiting for perfection before they start trading — whether they are working on the perfect plan, the perfect time, a perfect system, etc.
Trying to find happiness in stuff
Traders love stuff — systems, entry tricks, all manners of shiny objects. This one is so prevalent, I’ve written whole articles about chasing shiny objects and the disappointment that follows.
Lastly, I’ll leave you with some good news. Dr. Lyubomirsky provided a good roadmap for the intentional steps we can take to increase our day-to-day levels of happiness — things that will most certainly help in our trading and investing performance. We’ll dig into those steps after New Year's to see how we can apply them as traders and investors.

Once again, I find myself grateful and admiring great researchers who give us applied psychology tools. I’d love to hear your thoughts and feedback — just send an email to drbarton “at” vantharp.com.

Whatever your spiritual tradition, I pray that the peace, love and joy of this special season is with you and your family.

Until next week…

Great Trading,
D. R.

About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "vantharp.com".

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